Adam Vali, president of DEB Specialized Builders in Anaheim. His company, which has 50 employees, has been hard hit by the recession. The company is a general contractor in the commercial construction industry, with emphasis on financial markets, critical facilities, and healthcare.

Adam Vali, president of DEB Specialized Builders and his sister Tamara Martin, CEO, oversee their Anaheim company which currently has 50 employees.

Senior vice president Keith Martin, left, president Adam Vali, and CEO Tamara Martin, right, look over some building plans. Their company has been hit hard by the recession.

Adam Vali, president of DEB Specialized Builders, which is a general contractor in the commercial construction industry, with emphasis on financial markets, critical facilities, and healthcare.

Tamara Martin, CEO of DEB Specialized Builders in Anaheim

Adam Vali, left, president of DEB Specialized Builders with Keith Martin, center, senior vice president, and Tamara Martin, CEO. The company has two offices in California including their headquarters in Anaheim and a second office in Northern California.

Adam Vali, president of DEB Specialized Builders in Anaheim

Adam Vali talks with receptionist Martha Kokol at the company headquarters for DEB Specialized Builders in Anaheim. Vali is president of the company.

Adam Vali, president of DEB Specialized Builders, with his sister Tamara Martin, CEO. The Anaheim company is a general contractor in the commercial construction industry, with emphasis on financial markets, critical facilities, and healthcare.

Some Orange County business executives are pleased that Gov. Jerry Brown has proposed state action to create jobs, but most doubt it does enough to make a major dent in California’s 12 percent unemployment rate.

California added 186,600 jobs from July 2010 to July 2011. Still, almost 2.17 million state residents are unemployed (not counting those who have given up looking for work or those with part-time jobs who want to work full time).

On Aug. 25, Brown announced a jobs creation package, which would have to be passed by the legislature. Its three major proposals:

Expand an existing tax credit that Brown describes as underutilized, allowing firms with up to 50 employees (up from 20 now) to earn a tax credit for each new hire. The tax credit would increase from $3,000 to $4,000 per job. The program expires at the end of 2013.

Exempt businesses less than three years old from the state’s portion of sales tax (3.9375 percent) on the purchase of new manufacturing equipment; exempt other businesses from 3 percent of the sales tax on manufacturing equipment.

Require multi-state businesses to pay income taxes on the portion of their sales generated in California, eliminating the option to pay tax based on property and jobs in California.

That last proposal would increase state revenue by $1 billion, which would pay for the other two provisions, Brown said, and eliminate “an outrageous and perverse tax incentive that encourages multi-state businesses to create jobs outside of the state.”

Yorba Linda resident Rob Norden, CEO of Recom Group, a San Dimas technology display manufacturer, sums up the view of many: “I am pleased to see ANYTHING coming out of Sacramento to help small business,” said “Unfortunately, this is such a small effort that I don’t know if it’s going to have a significant impact.”

Giving Brown high marks for effort is Ronald Stein, vice president of PTS Staffing Solutions, which specializes in job placement for engineers and information technology experts. “Governor Brown is trying to spur a start for entrepreneurs to make choices…(his) first package may spur local job creation.”

Those two comments are about as positive as it gets. Many Orange County business people think Brown has misidentified the causes of California’s jobs problem or has proposed action that won’t prompt many businesses to hire.

WRONG TARGET

Companies don’t hire if they don’t have enough work, said Adam Vali, president of DEB Construction Inc. in Anaheim. “Our company adds staff when our work loan increases, not because of tax incentives.”

The county’s builders have been hammered in recent years. Commercial construction in Orange County has 10,300 fewer workers than in 2006.

Another executive whose business is affected by construction is Michelle M. Pettit, president of PC Associates, an Orange firm that does plan checks. “This won’t help my business at all! The small tax credit won’t even cover the expense of finding a new employee, let alone sustaining their employment.”

Bill Kilbourne, of Technology’s Edge, an Irvine IT service, said, “I believe that all of the initiatives in Gov. Brown’s proposals are positive steps in helping California to be a more business friendly state. but while this should keep businesses … in California, the real problem is on the demand side of the equation. The majority of the consumers need more discretionary income to spend on goods and services. Too many people have barely enough money for necessities.”

Brown’s proposals ignore the complexity of California’s business taxes and regulations, said Ken Virgin, CEO of iPayables Inc. in Lake Forest. “The main problem in California is that you have to be a lawyer to run a small business. Even to get the tax credit, I would probably have to hire a lawyer to see what restrictions and penalties will be applied if I do the paperwork wrong.

“High taxes cause pain to small business,” he added, “but uncertainty of compliance with state regulations and the often bizarre court rulings create risks that force businesses elsewhere.”

Michael E. Waiters of M.E. Waiters Financial & Insurance Services in Irvine added, “The major thing that is overlooked is that California is not a business friendly state. There are way too many fees, environmental laws and other things that drive business out of the state to other states to do business in.”

WRONG ACTIONS

“Gov. Brown seemingly wants to put a short-term Band-aid on an overall California philosophy that is widely anti-business,” said Dan Byers, founder of Daddy Cakes a Newport Beach food company. “The plan is too complex for small businesses to really take the time to understand the new short-term loop holes being proposed.”

Thomas G. Martin, owner of Martin Investigative Services in Newport Beach, agreed. “The changes in the tax code will have no impact financially nor create any jobs. For companies under 50 employees (Brown’s proposal) provides nothing. What incentive is a 3.9 percent tax break? Marginal at the very best.”

Buena Park financial administrator Baron Night added, “Temporary economic measures will not create long-term job growth. I don’t agree that a one-time, $4,000 credit will encourage businesses to hire additional employees. Businesses plan for the long term. A small percentage one-time reduction in the purchase price of new equipment is not going to generate a lot of interest on the part of small businesses to increase their debt load.”

Brown’s office released statements of praise from executives at Boeing, Genentech and the California Healthcare Institute. Night responded, “I am not surprised that the spokespeople for the large corporations think Jerry Brown’s ideas are great. Big business loves big government. Innovation comes from small businesses.”

Christopher Mott of Mott’s Miniatures and Dollhouse Shop Inc. in Placentia said, “Tax cuts or credits don’t help small businesses to hire more employees. For most small businesses the main cost of new employees are the payroll and the insurance, not the taxes.”

With such programs, he added, “you’ll have to have some bureaucracy to verify the claims being made by the small businesses. And of course there will be fraud or people who figure out a way to manipulate the program.”

FACTORS BEYOND THE STATE’S CONTROL

In all fairness to Gov. Brown and the legislature, other factors are discouraging California businesses from expanding, some Orange County businesspeople said.

Norden said, “State, county and city agencies are coming after small businesses with increased taxes and new fees to try to make up for their respective budgets that are falling short. We were recently hit with a hazardous waste fee…because we chose a (clean burning) propane powered forklift instead of a gas powered forklift.”

Norden said his brother recently moved his small furniture business from one side of the street that was Placentia to the other side of the street, which was in Anaheim. He didn’t realize that the annual fee to operate the firm’s spray booth would be $5,000 in Anaheim compared to $300 in Placentia.

Mott gave another example of local water companies petitioning to raise water rates because their revenues are down as customers reduced water use in the drought that ended several months ago. “They’re going to charge us more as a reward for saving so much water.”

ALTERNATIVE PROPOSALS

Some Orange County businesspeople propose other state actions that they think would be more effective in creating jobs.

Dennis Myers, a retired business consultant in Laguna Beach said, “The basic problem with all government proposals is that they do not sufficiently lower the risks associated with hiring personnel. The government should not concentrate on financial incentives but on risks to the employer. Uncertainty of regulations ,,, paint a very risky future for businesses.”

Plan check expert Pettit said, “What would really help is deregulation of all the mandated costs of hiring anyone, all the employer taxes and insurance. We need flexibility in working out compensation and hours with the actual person we’re hiring.”

Kathryn Hunter-Dyer of KLH Medical Transcription Service in Fountain Valley, suggested that companies should be required to bring jobs back from other countries as a condition to get tax breaks. “Some companies say they are sending work to a U.S.-based company because it has an office in the United States but the work is then sent offshore for process.”

Byers suggested long-term changes in the tax code rather than ones that expire in 2013. “Californians and businesses need horizons that go to 2025 for real growth in industry to take root in California. How about a zero tax for five years for any company that creates more than 100 new, permanent full-time jobs in California?”

Mott said reforms in workers compensation insurance and other business insurance to cut costs. “Workers compensation insurance is one of the biggest stumbling blocks for small businesses.

Stop driving businesses out of the state with regulation,” he added.

Night agreed, singling out the state’s environmental laws. “Repeal or at least delay the implementation date by at least five years on the ‘cap and trade’ law that goes into effect on Jan. 1, 2012. Re-align the (Air Quality Management District) by removing their regulatory power of self financing via fines. Environmental regulations regarding off-shore drilling should be re-evaluated. One oil spill in 80 years does not justify shutting down new drilling.”

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